A Company Has Liquid Assets of $600,000 and Current Liabilities

question 110

Multiple Choice

A company has liquid assets of $600,000 and current liabilities of $500,000.What is the effect on the quick ratio if the company records an accrual adjustment for salaries of $100,000 and pays accounts payable in the amount of $50,000?

• A)The quick ratio will not change as a result of either of these transactions.
• B)The accrual adjustment will cause the quick ratio to decrease and the payment of accounts payable will cause an increase in the quick ratio.
• C)The accrual adjustment will cause the quick ratio to increase and the payment of accounts payable will not affect the quick ratio.
• D)The accrual adjustment and the payment of accounts payable will both cause the quick ratio to decrease.

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